Online sales have grown exponentially, heaping pressure on global logistics. To maintain the consistency of their excellent Amazon fulfillment service, the e-commerce giant introduced inventory storage limits for items each seller can have in Amazon fulfillment centers. An FBA prep Amazon service can help you avoid such limits – lets dive in.
What Are Amazon Inventory Limits?
These are restrictions imposed by Amazon 3PL services on the inventory storage space to improve organization in Amazon fulfillment centers. The inventory limits do not apply to all sellers using Amazon 3PL services. They only apply to seasoned or new sellers who have a slow-moving inventory.
The storage limit is linked to the seller’s inventory in the Amazon fulfillment process. Sellers are evaluated monthly by monitoring their inventory performance index (IPI) and will receive indicators in their accounts if they are slapped with storage limitations.
The situation was different before 2020, but things later changed because of the unexpected increase in sales through Amazon 3PL services due to the lockdown and social distancing guidelines. Amazon became strict with its inventory limits policies. It has become an essential part of the Amazon fulfillment process. The best you can do is to use an FBA prep Amazon to help you prepare your inventory adequately before sending it.
What is an IPI score?
Introduced in 2018, the Amazon IPI score is an indicator that helps determine a seller’s ability to manage their inventory. It also helps manage the Amazon fulfillment center storage space for smooth shipping and receiving. The IPI score is given by Amazon and usually ranges from 0 – 1000.
Currently, a good IPI range starts from 450. It usually changes in several instances depending on several factors like the capacity of an Amazon fulfillment center to keep inventory. A perfect example is during the height of the pandemic where the IPI threshold was 500.
Those eligible for an IPI score are sellers with an inventory at an Amazon fulfillment center, a professional selling plan, and recent activity in their accounts. Amazon will determine the sellers to be slapped with inventory limits, and they are yet to clarify how they calculate one’s IPI score.
They have severally stated that their formula is exclusive and reserve the right of not sharing it. Amazon has specified three things that determine the IPI score of an account:
- Increasing sales
- Reducing excess inventory
- Make sure that all inventory is “purchasable.”
Both sellers and Amazon 3PL services benefit from the IPI score. Proper inventory management minimizes lost sales and holding costs in the Amazon fulfillment process.
This creates room for improvement in the Amazon fulfillment service since sellers will stock the right products and in the right amounts in their inventories.
Do Inventory Limits Affects Seller Central & Vendor central?
Not really. They are only placed on Seller Central accounts, not on Vendor Central accounts. Inventory limits only affect those who use Seller Central and Amazon Fulfillment centers. If you want to learn more about Vendor Central impacts, read more about our 2022 guide here.
Account based limits vs. ASIN based limits
The shift from ASIN based limits to account based limits by Amazon has been great for new Amazon FBA sellers. ASIN limits protect you from sending products with high inventory levels but low customer demand to Amazon fulfillment centers.
It was quite difficult for most sellers to meet the 200-unit limit. Most people who sold products in bulk were forced to shift to a different 3PL company. The 450 to 1000 restock limit for starting accounts is ideal for these sellers using Amazon 3PL services.
For established sellers, it’s a bit more complicated. Some sellers with a good IPI and moderate moving inventory will appreciate the shift from ASIN to account-based limits. Those who sell fast and at high volumes may experience some challenges with the new limit on item restocking.
It can result in delays since inventory moves out faster than how the restocking limit gives a chance from product replacement. This can cause customer satisfaction problems and negatively affect a seller’s IPI in the following quarter.
The effects of both ASIN and account-based limits can be positive or negative, depending on the products you are dealing with and your account.
What’s causing Amazon Inventory limits to be placed on your account?
Multiple factors subject you to inventory limits when using Amazon 3PL services. The major contributing factors include:
- Sell-through rate
- Log-term storage or excess inventory
- Stranded inventory
You should also understand that you can be subjected to account-level limits depending on your account and country. Your account has a limit of the number of units or ASIN level limits, meaning there is a total limit of each item you can send, sometimes both.
Immediate actions to improve inventory limits & IPI score
One of the ways to boost your storage levels or improve inventory limits in an Amazon fulfillment center is by improving your IPI score. Here are some actions you can take:
- You should keep a balanced inventory level between in-stock and sell. You should also avoid overstocking.
- Remove or sell off excess inventory fast. Do your best to ensure you don’t have stagnant inventory in Amazon fulfillment centers using up much warehouse space. Holding on to inventory can result in extra charges by Amazon 3PL services and poor IPI scores.
- Increase your sell-through by making smaller but frequent shipments.
- Make good use of FBM for slow moves.
Additional ways to improve inventory limits & IPI score
So, how can you improve your inventory limits and IPI score immediately when using Amazon 3PL services? Here are some additional ways:
- Reduce excess inventory. Sell more inventory to reduce the number of units you have in an Amazon fulfillment center.
- Drive more sales. You can do this through external traffic or a PPC campaign.
- Have popular products in stock at Amazon fulfillment centers.
- Sort out stale inventory.
- Reach out to Amazon Multi-Channel Fulfillment (MCF) directly.
- Stay clear of long-term storage charges when using Amazon 3PL services.
- Strategize and remain aggressive when introducing new products to an Amazon fulfillment center.
- If you use Amazon’s fulfillment program for North America (NARF), you should review and introduce it directly into a Canadian Amazon finish cut (FC) instead of only American FC’s.
Improve Your Inventory Performance Index (IPI)
To improve your IPI, you should:
- Increase sales. You should improve your Amazon FBA sell-through rate, which consists of units sold and units shipped in the previous 90 days to be divided by the average units available in Amazon fulfillment centers during that specific period.
- Units sold and units shipped in the previous 90 days/ average units available in Amazon fulfillment centers
- Block inbound shipments awaiting inbound performances.
- Make sure shipments are directed and delivered to Amazon fulfillment centers fast with strategic introductions, inbounding, and the right choice of carriers.
Monitor your stock regularly to boost your IPI score and improve your sell-through rate for a successful Amazon fulfillment process.